Farmland has long been considered a steady asset class, but with emerging pressures and opportunities, it’s increasingly becoming an area for innovation. 

One big pressure and opportunity on farmland is climate change. Agriculture generates greenhouse gas emissions, consumes freshwater, and is a driver of habitat and biodiversity loss. At the same time, agriculture holds massive potential to reduce emissions, rebuild biodiversity, and improve nutrient cycling while delivering myriad social benefits. 

So is farmland investing a leverage point for impact? And how does agtech fit in?  

In a recent experimental-format episode of the AgTech...So What? podcast, we spoke with Ben Gordon, CEO of Fractal Agriculture, a tech company rethinking farmland investing that very much believes their model will drive regenerative practices. 

Fractal is just one of several companies we’re seeing that are using technology to unlock new types of farmland investment models and incentives to drive climate outcomes. 

Today we’re sharing some of our insights and frameworks to elevate the conversation and hopefully attract others who are curious about this space. From the macro dynamics affecting farmland supply and demand to the different tech-driven investment models taking shape, here’s what we’re learning.

The surprising macro picture on farmland supply and demand

Ask any farmer or farmland investor and they’ll tell you that the best thing about farmland is that “they’re not making any more of it.” 

As far as markets go, a product with a fixed supply is pretty appealing. What’s more, with the growing impacts of climate change, farmland supply is likely to see net decreases around the world as factors like sea-level rise and aridification play out. Add in the fact that population growth and urbanization are eating into the globe’s arable land base, and the supply dynamics seem pretty compelling. 

This is part of the story. In fact, global farmland area peaked around the year 2000 and has since remained steady, hovering around 4.8-4.9 billion hectares. 

But the whole picture is more nuanced. Despite the total number of farmland hectares declining, agricultural output continues to rise. Productivity gains driven by technology (e.g., genetics, equipment) and farming practices have helped us do more, without needing to make more. 

So does that mean the story of farmland demand is not as promising as it might appear? And will it continue to be a supply constrained product?

What about population growth? 

One factor we haven’t discussed yet is population growth, and the fact that productivity growth might not be sufficient to satisfy the growing demands of a growing population. The world has a growing middle class that wants fewer grains and pulses and more meat and dairy, and these shifts are going to require more farmland– right? 

Surprisingly, the data since 2000 has not borne out that idea. The world population grew more between the year 2000 and 2023 (~2 billion) than it will between 2023 and 2050 (~1.7 billion), and yet we used 100 million fewer hectares of farmland in 2023 than we did in 2000. During that period we also managed pretty massive increases in animal protein production. 

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What about energy? 

There are many more pressures on farmland than food demand. Farmland is increasingly being used in countries like the United States for energy production– namely corn and oil seeds that become ethanol and biofuels.

If corn were to become a valuable input to the production of, say, sustainable aviation fuel, that would lead to a significant change in demand. Would that incentivize us to create more farmland? Perhaps not, as history teaches us that market mechanisms would, in time, likely even out those impacts. Notably, despite the passage of the Renewable Fuel Standard which opened the floodgates of the ethanol market in 2007, total US farmland has continued an interrupted downward trend over the last 20 years. 

Farmland is…land

These dynamics, plus the fact that farmland often offers uncorrelated upside, illustrate why farmland is a valuable asset class. But it’s also important to remember that farmland is just… land. Land that has multiple uses, and which one is deemed “best” is highly location-dependent, and continuously evolving– especially as over $500 billion of farmland is expected to change hands in the next 10 years.

For farmland investors (including farmers), identifying the most resilient, productive, and consequential hectares to invest in– the ones that will still be feeding and clothing the world for the next 30, 50, and 100 years amidst increasingly complex risks- is the key. 

This commercial + impact opportunity is where the interplay between farmland and technology is becoming increasingly important. 

The tech-enabled farmland investment landscape 

The traditional farmland investment model includes multiple pathways, from direct ownership (i.e., buy and run a farm) to investing in agricultural funds. And given the above dynamics, traditional models are expanding to include new structures and characteristics, offering investors choices including own-versus-operate models and the degree to which regenerative practices and climate measurement are important. 

At the same time, agtech and farmland investment are converging, opening new avenues for new investors in farmland globally. Here are some of the factors and companies we’ve been considering as we assess this space.

Debt vs. Equity vs. Alternative Structures: In addition to equity-based ownership models, debt structures (e.g., Steward) are emerging as a way for investors to offer capital without taking on direct farmland ownership, while other models, like revenue-sharing (e.g., IIF), seek to align incentives between investors and farmers. Each structure has implications for risk, returns, and investor vs. farmer control over land use practices, and not all companies solely offer one solution (e.g., FBN Finance).

Investor Types – Retail, Wholesale, Institutional, or a Mix: As farmland investment models diversify, so do their investor bases. Historically dominated by institutional investors and family offices, farmland is now attracting interest from retail investors to impact funds. Companies like AcreTrader are experimenting with ways to democratize access to farmland as an asset, making it possible for a broader audience to participate and diversifying the risk and funding profile.

Scale, Geographic, and Commodity Focus: Scale is also crucial in farmland investment, and opportunities vary by geography and crop type. Like with most of agtech, volumes and values differ greatly (e.g., high value specialty crops vs. high volume row crops). Propagate, for example, focuses on agroforestry.

Impact: While many farmland investments have traditionally emphasized financial return, there’s a growing focus on impact. On one end of the spectrum, some companies highlight stewardship as a core tenant, while others, like Fractal and MAD Capital, focus on sustainable practices and climate resilience as core components of their approach, albeit in different ways. There’s plenty of nuance and tradeoffs here, such as whether impact is determined by certifications (e.g., Organic), practices (e.g., no-till), and/or outcomes.

Farmland tech investing… so what?

While we haven’t made any investments in this area yet, the convergence of finance, tech, and agriculture aligns with our broader themes of embedded finance & risk and lower-intensity production. We’re excited about the potential for innovation to create a more resilient and sustainable agricultural system, particularly when it comes to empowering farmers, creating productivity-aligned incentives for sustainable practices, and unlocking new ways to manage risks. 

One question we are left with, that Ben also raised on the podcast, is whether these technology companies are truly startups or are more like tech-enabled real asset investments. Across the landscape, the tech component can take various forms. For some, technology supports asset management through enhanced data and more precise land valuation. Others are directly incorporating agtech innovations—such as soil health monitoring or crop data analytics—to optimize land use and productivity. And some are separating out their “tech companies” from their “funds” – sourcing different investors and targeting different return profiles (i.e., equity vs. interest, etc.) accordingly. 

Ultimately, it’s a provocative and welcome challenge for those of us in the investment seat to continue to evolve our thinking on how to unlock impact and returns in agriculture. 

‍If you’re working in this space, whether as a startup or investor, or if you have insights on the frameworks we’ve discussed, we’d love to connect and hear your thoughts. Farmland investing is evolving fast, and the more we collaborate and share insights, the better positioned we all are to make a meaningful impact!